Legislators responsible for royalties
Much has been written about New Mexico Land Commissioner Stephanie Garcia Richard’s decision to halt certain leases of state lands to oil and gas companies until the Legislature does its due diligence to increase royalty rate caps. Much of the discourse seems aimed at the commissioner herself, with support or disdain seeming to fall along political lines. However, it seems pertinent to refocus the issue on those responsible for the royalty rates, the Legislature.
Had the issue not come before the Legislature this year, and every year in recent memory, one might have an argument to aim attention at the State Land Office for the decision, but frankly, legislative inaction left the office little choice.
New Mexico is missing out on millions of potential dollars from the below-market royalties that have not been updated in over 50 years. Regardless of political affiliation, everyone should see the failing of the state’s lawmakers over that span of time to take action.
Everyone in the state is familiar with the boom-and-bust cycle of the oil industry. Indeed, nearly every conversation in the Legislature recently has been predicated with some form of “we must do what we can with the funds we have now” given the record-breaking revenue we’ve seen from the State Land Office’s management of our resources.
It bears remembering this year House Bill 48 passed the full House on Day 13 of the Legislature, but it wasn’t until the last full day of the session the Senate Finance Committee took up the bill and failed to move it forward. The political will to raise the royalty cap seemed there, until it didn’t.
Oil companies will go where the oil is. Texas’ royalty cap rate is at 25%, and it’s the nation’s largest oil producer. There is no basis to think oil companies would not still vie for leases in New Mexico if the rates were raised here. Even the federal government, which has not raised the federal minimum wage in 15 years, raised royalty rates in 2022, and federal leases have and are still occurring throughout the Permian Basin.
Every New Mexican should be thankful to Garcia Richard for doing her due diligence to hold our lands in trust until the Legislature does its duty and raises the rates to the appropriate market value.
New Mexico must work toward a just transition away from such a heavy reliance on oil and gas revenue not only to avoid the pitfalls of the boom and bust cycle, but also for the inevitable final bust that is coming sooner or later as oil and gas is surpassed by cheaper and cleaner renewable energy sources. Until then, we must ensure our resources are being valued fairly, and that responsibility ultimately rests with the body charged with changing that law.